U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2007
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE EXCHANGE ACT |
For the transition period from to .
Commission File No. 0-9458
Eagle Exploration Company
(Exact name of registrant as specified in its charter)
| Colorado | 84-0804143 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
1801 Broadway, Suite 1010, Denver, Colorado 80202
(Address and zip code of principal executive offices)
Registrant’s telephone number, including area code: (303) 296-3677
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x.
Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
| Class | Number of Shares | |
Common stock | 3,072,836 |
Transitional Small Business Disclosure format: (Check one) Yes ¨ No x.
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Page | ||||
PART I | FINANCIAL INFORMATION | |||
Item 1 | Financial Statements: | |||
| Condensed Consolidated Balance Sheets – March 31, 2007, and December 31, 2007 (Unaudited) | 2 | |||
| 3 | ||||
| 4 | ||||
| Notes to Unaudited Condensed Consolidated Financial Statements | 5 | |||
Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 5 | ||
Item 3 | Controls and Procedures | 6 | ||
PART II | OTHER INFORMATION | |||
Item 6 | Exhibits and Reports on Form 8-K | 7 | ||
| 8 | ||||
EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
| PART I | FINANCIAL INFORMATION |
| Item 1 | Financial Statements. |
Condensed Consolidated Balance Sheets
| December 31, 2007 | March 31, 2007 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 418,520 | $ | 550,460 | ||||
Certificates of deposit | 37,500 | — | ||||||
Marketable securities | 39,940 | 90,335 | ||||||
Accounts receivable | 11,347 | 5,978 | ||||||
Total current assets | 507,307 | 646,773 | ||||||
Office furniture, equipment and other, net of accumulated depreciation of $218,710 and $215,953 at December 31, 2007 and March 31, 2007, respectively | 20,519 | 23,276 | ||||||
Equity investment in LLC | 694,711 | 678,033 | ||||||
Other assets | 24,250 | 24,250 | ||||||
Total assets | $ | 1,246,787 | $ | 1,372,332 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 3,738 | $ | 2,738 | ||||
Deposits, deferred revenue and other | — | 2,048 | ||||||
Total current liabilities | 3,738 | 4,786 | ||||||
Stockholders’ equity | ||||||||
Common stock, no par value; authorized 10,000,000 shares; 3,072,836 shares issued and outstanding | 6,632,998 | 6,632,998 | ||||||
Accumulated deficit | (5,379,889 | ) | (5,296,413 | ) | ||||
Unrealized holding gain (loss) on investments available for sale | (10,060 | ) | 30,961 | |||||
| 1,243,049 | 1,367,546 | |||||||
Total liabilities and stockholders’ equity | $ | 1,246,787 | $ | 1,372,332 | ||||
See notes to unaudited condensed consolidated financial statements.
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EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
| For the Three Months Ended December 31, | For the Nine Months Ended December 31, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenue | ||||||||||||||||
Oil and gas | $ | 24,828 | $ | 12,089 | $ | 49,828 | $ | 38,960 | ||||||||
Total revenue | 24,828 | 12,089 | 49,828 | 38,960 | ||||||||||||
Expenses | ||||||||||||||||
Depreciation | 919 | 919 | 2,757 | 2,746 | ||||||||||||
General and administrative | 45,988 | 47,711 | 146,989 | 161,909 | ||||||||||||
Total expense | 46,907 | 48,630 | 149,746 | 164,655 | ||||||||||||
Loss from operations | (22,079 | ) | (36,541 | ) | (99,918 | ) | (125,695 | ) | ||||||||
Other income | ||||||||||||||||
Interest and dividend income | 4,054 | 6,588 | 15,586 | 22,475 | ||||||||||||
Gain on sale of investment | — | — | 39,376 | — | ||||||||||||
Equity in losses in LLC | (12,894 | ) | — | (38,520 | ) | (17,391 | ) | |||||||||
Total other income (expense) | (8,840 | ) | 6,588 | 16,442 | 5,084 | |||||||||||
Net loss before other comprehensive income (loss) | (30,919 | ) | (29,953 | ) | (83,476 | ) | (120,611 | ) | ||||||||
Other comprehensive income (loss) | ||||||||||||||||
Unrealized gain (loss) on investments available-for-sale | (3,900 | ) | 135 | (41,021 | ) | (12,818 | ) | |||||||||
Comprehensive (loss) | $ | (34,819 | ) | $ | (29,818 | ) | $ | (124,497 | ) | $ | (133,429 | ) | ||||
Basic and diluted weighted average common shares outstanding | 3,072,836 | 3,072,836 | 3,072,836 | 3,072,836 | ||||||||||||
Basic and diluted loss per common share | $ | (.01 | ) | $ | (.01 | ) | $ | (.04 | ) | $ | (.04 | ) | ||||
See notes to unaudited condensed consolidated financial statements.
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EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
| For the Nine Months Ended December 31, | ||||||||
| 2007 | 2006 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (83,476 | ) | $ | (120,611 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 2,757 | 2,746 | ||||||
Equity in losses in LLC | 38,520 | 17,391 | ||||||
Gain on sale of investment | (39,376 | ) | ||||||
Change in assets and liabilities: | ||||||||
Accounts receivable | (5,369 | ) | 498 | |||||
Accounts payable | (1,048 | ) | — | |||||
| (4,516 | ) | 20,635 | ||||||
Net cash flows used in operating activities | (87,992 | ) | (99,976 | ) | ||||
Cash flows from investing activities | ||||||||
Purchase of certificate of deposit | (37,500 | ) | ||||||
Payment of contribution to equity investment in LLC | (55,198 | ) | (58,750 | ) | ||||
Proceeds from sale for investments available-for-sale | 48,750 | 3,253 | ||||||
Net cash flows used in investing activities | (43,948 | ) | (55,497 | ) | ||||
Net decrease in cash and cash equivalents | (131,940 | ) | (155,473 | ) | ||||
Cash and cash equivalents, beginning of year | 550,460 | 750,843 | ||||||
Cash and cash equivalents, end of quarter | $ | 418,520 | $ | 595,370 | ||||
Supplemental disclosure of cash flow information:
The change in unrealized loss on investments available-for-sale for the nine months ended December 31, 2007 and December 31, 2006 was $41,021 and $12,818, respectively.
See notes to unaudited condensed consolidated financial statements.
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EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Opinion of Management
1. The financial information furnished reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position at December 31, 2007 and March 31, 2007 and of the unaudited condensed consolidated statements of operations for the three and nine months ended December 31, 2007 and 2006 and the unaudited condensed consolidated statements of cash flows for the nine months ended December 31, 2007 and 2006. The results of operations and statements of cash flows for the periods presented are not necessarily indicative of those to be expected for the entire year.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles. For further information refer to the audited consolidated financial statements and notes thereto for the year ended March 31, 2007, included in the Company’s 10-KSB filed with the Securities and Exchange Commission on June 29, 2007.
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Financial Condition, Liquidity and Capital Resources
The Company’s cash at December 31, 2007 was $418,520 as compared to cash at March 31, 2007 of $550,460. This decrease in cash of $131,940 was primarily due to the additional equity investment and interest expense in the Buffalo Highlands, LLC, (“LLC”) and operating costs.
Stockholders’ equity decreased from $1,367,546 at March 31, 2007 to $1,243,049 at December 31, 2007 or $124,497. The Company incurred an unrealized loss on investments available-for-sale of $41,021 and a net loss before other comprehensive income of $83,476 for the nine months ended December 31, 2007.
In an effort to preserve the Company’s capital, management agreed along with the other members of the LLC to secure a $1,000,000 line of credit to be used for the quarterly installment payments on the Promissory Note to the Seller of the land held by the LLC, the annual water payments and other miscellaneous cost while holding the property. The Company and one other member of the LLC guaranteed the line of credit. The line of credit with the bank is due approximately 30 days prior to the balloon payment on the Promissory Note to the Seller, due January, 2010. The LLC will attempt to renegotiate the Promissory Note and the line of credit in the event the property is not sold prior to the time when both the Promissory Note to the Seller and the line of credit with the bank are due and payable.
See notes to unaudited condensed consolidated financial statements.
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EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
Results of Operations
For the Nine Months Ended December 31, 2007, Compared to the Nine Months Ended December 31, 2006.
For the nine months ended December 31, 2007, the Company’s total oil and gas revenue was $49,828 as compared to $38,960 for the nine months ended December 31, 2006. The increase was due to the receipt of a lease bonus payment in the amount of $12,507 during the current quarter. Interest and dividend income was $15,586 for the nine months ended December 31, 2007 and $22,475 for the nine months ended December 31, 2006. This decrease is the result of lower interest rates and smaller investments.
Total expense for the nine months ended December 31, 2007, was $149,746 as compared to $164,665 for the nine months ended December 31, 2006. Unrealized loss on investments available-for-sale for the nine months ended December 31, 2007 was $41,021 compared to an unrealized loss of $12,818 for the nine months ended December 31, 2006. This resulted in a comprehensive loss of $124,497 and $133,429 for the periods ended December 31, 2007, and 2006, respectively.
| Item 3: | Controls and Procedures |
As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commissions rules and forms. There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.
In connection with the audit of the year ended March 31, 2007, there were no “Reportable Events” within the meaning of Item 304(a)(1)(v) of Regulation S-K. However, there is a lack of segregation of duties that is considered to be a weakness in the Company’s internal controls relating to the adequacy of staffing and size of the accounting and finance department.
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PART II
| Item 6: | Exhibits and reports on Form 8-K |
| Exhibit 31.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| Exhibit 31.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| Exhibit 32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| Exhibit 32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| (b) No reports on Form 8-K have been filed during the quarter-ended December 31, 2007. | ||
See notes to unaudited condensed consolidated financial statements.
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EAGLE EXPLORATION COMPANY AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EAGLE EXPLORATION COMPANY (Registrant) | ||
| By: | /s/ Raymond N. Joeckel | |
| Raymond N. Joeckel | ||
| President/Chief Financial Officer | ||
| By: | /s/ Paul M. Joeckel | |
| Secretary/Vice President Operations | ||
Date: February 12, 2008
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